April 19, 2024

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[THE INVESTOR] Daewoo Engineering and Construction’s shares soared on Sept. 1 following a news report that Malaysian oil and gas giant Petronas is mulling to acquire controlling stake in the troubled builder. 

The stock price closed at 7,430 won (US$6.61), up 5.69 percent from the previous day while the benchmark KOSPI fell 0.23 percent to 2,357.69 points. 

The Maeil Business News reported earlier on the day that the Malaysian company is conducting due diligence to participate in the upcoming bids in October. 

Considering Daewoo E&C’s current market cap of about 2.9 trillion won, the deal price is expected to reach 2 trillion won, the report said.

Petronas has reportedly been mulling the acquisition since early this year and is likely to form a consortium with Malaysian banks May Bank and CIMB.

So far, oil giant Saudi Aramco, Abu Dhabi Investment Council and some Chinese and US construction companies are cited to be interested in the upcoming bids.

Analysts here said Petronas and Saudi Aramco, in particular, have keen interest in the Korean builder’s expertise in nuclear reactors as part of their efforts to diversify their oil-focused business portfolio amid prolonged weak oil prices.

Established in 1973, Daewoo E&C was spun off from ill-fated conglomerate Daewoo Group in 2000 and went through a debt workout program until 2003. Kumho Asiana Group took over the company in 2006 but the cash-strapped conglomerate sold the firm to Korea Development Bank, the policy lender, in 2010.

KDB with a controlling 50.75 percent stake plans to sell the stake and the management rights by early next year. The deal managers include Bank of America, Merrill Lynch and Mirae Asset Daewoo.

By Park Ga-young (gypark@heraldcorp.com)